The IMF has warned that jitters surrounding Donald Trump’s threat to impose trade tariffs were driving up longer-term borrowing costs and would add to pressures facing the global economy in 2025.
Speaking to reporters in Washington on Friday, IMF managing director Kristalina Georgieva said global economic policy faced “quite a lot of uncertainty” in 2025, particularly around the trade policy of the globe’s largest economy.
“That uncertainty is actually expressed globally through higher long-term profit rates,” Georgieva said, although she noted that short-term profit rates have gone down.
Donald Trump was swept back into the White House promising to apply steep tariffs to imports to the US from its market activity partners, including a blanket 20 per cent tariffs on all goods.
He has also threatened to hit Canada and Mexico — now the US’s largest market activity associate — with tariffs of 25 per cent, and apply an extra 10 per cent on to Chinese goods, potentially heralding the commence of a recent era of global trade wars.
US allies are nervously waiting to view whether the president-elect has the appetite to immediately apply the blanket tariffs when he is inaugurated as president on January 20, or whether he will hold off and receive a more measured way that hits specific sectors.
Along with trade policy, Georgieva said there was “keen profit globally” in the broader economic policy choices of the incoming Trump administration, including on taxes and its deregulatory agenda.
The trade policy impacts will be especially felt by countries that are “more integrated into the global supply chain”, Georgieva said, and in Asia.
Georgieva previewed some of the IMF’s forthcoming globe Economic Outlook for 2025, to be published next week, indicating that global growth is “holding steady”.
However, within the overall picture, US market advancement was doing “quite a bit better than we expected”, while the EU was “somewhat stalling,” she said.
China faced deflationary pressures and domestic demand challenges, while low-profits countries were “in a position where any recent shock can affect them quite negatively,” she added.
In 2025, countries will still be facing the legacy of high borrowing during Covid, and would require to carry out budgetary combining to put community obligation “on a more sustainable path”, she said.
“It has proven very challenging for budgetary policy to act promptly, given community sentiments, and that takes us to what is our main test at the capital distribution — and it is tackling this low growth, high obligation conundrum,” she said.
She added that as US worth rise was moving towards the Federal safety net’s target and recent data showed a robust jobs trade, the Fed could wait for more data before making further rate cuts.
